​Malabu-like deals cost Nigeria, other developing nations $1 trillion yearly — Report

ONE Africa Executive Director

Nigeria and other developing nations in Africa and elsewhere, particularly those rich with natural resources, are losing about $1trillion (about N160 trillion) annually to corruption perpetrated by their governments in collaboration with secret shell companies, a new study says.

The research was carried out by ONE Africa, an advocacy group aimed at ending extreme poverty and preventable disease, particularly in Africa.

The group said the loss was not development aid, but monies generated from the exploitation of natural resources and tax revenues illegally siphoned out of developing countries.

The report identified various illegal schemes deployed by phantom firms to commit these crimes, including money laundering and tax evasion.

Phantom firms are used in the theft of public funds, illegal tax evasion and money laundering by hiding the identities of individuals who profit from illegal activities, including trafficking of arms, drugs and people.

The report titled “The Trillion Dollar Scandal”, launched ahead of the G20 summit billed for November, estimated that about 3.6 million deaths as a result of poverty, hunger and disease could have been prevented each year in the world’s poorest countries if concrete actions were taken to end the secrecy allowing corruption and criminality to thrive.

ONE Africa Executive Director, Sipho Moyo, described corruption in Africa as a killer that has claimed about 3.6 million lives in developing countries that could have been saved if the web of secrecy aiding criminality and corruption were dismantled.

African countries alone lost about $76.9 billion (over N12.304 trillion) through illicit financial flows in 2011, the report said.

No fewer than 20 countries in sub-Saharan Africa are rich in natural resources, but lack of transparency has made it difficult for citizens to get a fair deal from the management of the proceeds from the exploitation of these resources.

The former Minister of Education and Nigeria’s first head of its extractive industry transparency agency, Oby Ezekwesili, said Nigeria lost an estimated $400 billion (about N64 trillion) to “oil thieves” since independence in 1960.


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“When governments are deprived of their own resources to invest in the essentials—like nurses and teachers—the human cost is devastating,” Mr. Moyo said.

“It is time to draw back the veil of secrecy behind which too many companies operate.”

The report quoted the former United Nations Secretary General, Kofi Annan, as saying, “Every tax jurisdiction should be required to publicly disclose the full beneficial ownership structure of registered companies.”

ONE Africa’s analysis revealed that in 2013 alone about $20 trillion (about N3,200 trillion) of global undeclared assets were held in offshore tax havens, with about $3.2 trillion (about N512 trillion) of that originating from developing countries.

“If the income on this money were taxed at the current top marginal rate for each country, it could have yielded revenues of about $19.5 billion per year that countries could have spent on their own development,” the report said.

Focus on four areas

The report identified four key areas that national governments must commit to put in place specific policies to increase transparency and combat corruption in these countries.

These areas include increasing transparency in natural resource deals, use of phantom shell companies, curbing tax evasion and money laundering to help ensure significant reduction in massive financial losses from developing countries.

ONE Africa’s analysis revealed that if these steps were taken to end the trillion dollar scandal, sub-Saharan Africa alone would recover money that could be used to educate additional 10 million children per year and pay for additional half-million primary school teachers to provide education for all out-of-school children in 16 African countries.

Equally, such recoveries, the group said, would help provide antiretroviral drugs for over 11 million people living with HIV/AIDS, more than 95 per cent of whom are eligible; as well as pay for almost 165 million vaccines against children killer diseases.

Highlighting the role of anonymous shell companies in corruption scandals, the report recalled the controversial selling off of oil fields in Nigeria in 2011 by Shell and Eni subsidiary companies, which paid $1.1 billion to the Federal Government for an offshore oil block estimated to hold reserves in excess of nine billion barrels.

The Nigerian government transferred the amount to an account in the name of Malabu Oil & Gas, a phantom firm linked to the former Petroleum Minister, Dan Etete, found to be owner of 30 per cent owner of the company established in 1998 while in office.

ONE Africa noted that a positive utilisation of the $1.1 billion Malabu oil money could have helped provide about 3.2 million HIV-positive Nigerians with life-saving antiretroviral drugs; hire more than 494,000 additional primary school teachers, resulting in an 86 per cent increase in Nigeria’s teacher workforce.

The Nigerian Extractive Industries Transparency Initiative, NEITI, reported that the Federal Government recovered about $2 billion (about N320 billion) during various audit exercises it conducted between 1998 and 2008.

Between 1999 and 2005, the new report said the proportion of Federal Government revenues from natural resources grew from 63 per cent to 75 per cent without any changes to the country’s tax regime due to adherence to transparency principles in oil industry operations.

Another audit report released in 2009 by NEITI revealed significant discrepancies of more than $800 million (N128 billion).


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